Wednesday, March 14, 2007

Record foreclosures hit mortgage lenders

In today's USA Today....

Record foreclosures hit mortgage lenders

By Noelle Knox, USA TODAYThe reason many mortgage lenders are in trouble became alarmingly clear Tuesday. The Mortgage Bankers Association said more than 2.1 million Americans with a home loan missed at least one payment at the end of last year — and the rate of new foreclosures hit a record.The problem is most severe for borrowers with scuffed credit and adjustable-rate mortgages. More than 14% of them were behind on their payments. And the worst is yet to come, the MBA said. At least $300 billion in subprime ARMs will reset this year to higher interest rates. Those borrowers face higher payments and a harder time refinancing.

States with the most job losses are seeing the largest number of delinquencies. In Mississippi, Louisiana, West Virginia, Michigan, Alabama, Missouri and Tennessee, at least one in five subprime ARMs is in default.

In the final quarter of last year, 0.54% of homeowners with a mortgage began foreclosure proceedings — a record — up from 0.46% in the third quarter.

Calls from distressed homeowners to the Homeownership Preservation Foundation, a free credit counseling service (888-995-HOPE or 888-995-4673), have more than doubled from last summer.

Percentage of all delinquent loans in the fourth quarter by state (State data are not seasonally adjusted):

To stem their losses, lenders are ending 100% financing plans, requiring better credit scores and demanding more proof of a borrower's income. The stricter rules are squeezing first-time buyers, as well as homeowners who want to refinance.

Sellers, meantime, must compete with a rising number of foreclosures at cut-rate prices. Lenders that seize control of a house are usually aggressive about selling it, to limit the cost of maintaining and marketing it.

It's like a one-two punch, Zandi says. "It means less demand because many potential borrowers will be locked out," just as foreclosures expand the supply of homes for sale.

Some economists, such as Patrick Newport of Global Insight, had been expecting the real estate market to rebound soon. Now, he says, "We probably won't see a recovery in the housing market until next year."

In fact, sales of new homes are expected to fall 10% this year, while sales of existing homes are likely to slip about 1%, the National Association of Realtors said Tuesday.

States with the most job losses are seeing the largest number of delinquencies. In Mississippi, Louisiana, West Virginia, Michigan, Alabama, Missouri and Tennessee, at least one in five subprime ARMs is in default.

In the final quarter of last year, 0.54% of homeowners with a mortgage began foreclosure proceedings — a record — up from 0.46% in the third quarter.

Calls from distressed homeowners to the Homeownership Preservation Foundation, a free credit counseling service (888-995-HOPE or 888-995-4673), have more than doubled from last summer.

Mississippi 10.6%

Louisiana 9.1%

Michigan 7.9%

Indiana 7.8%

Georgia 7.5%

West Virginia 7.4%

Texas 7.4%

Tennessee 7.3%

Ohio 7.3%

Alabama 7.1%

Kentucky 6.3%

South Carolina 6.3%

Pennsylvania 6.3%

North Carolina 6.1%

Arkansas 6.1%

Missouri 6.1%

Oklahoma 6.1%

Illinois 5.4%

Kansas 5.1%

Rhode Island 5.0%

Maine 4.9%

Florida 4.9%

New York 4.8%

Nebraska 4.7%

Massachusetts 4.5%

New Jersey 4.5%

Delaware 4.5%

New England 4.5%

Iowa 4.4%

New Hampshire 4.4%

Colorado 4.4%

New Mexico 4.3%

Connecticut 4.3%

Maryland 4.3%

Wisconsin 4.1%

Nevada 4.1%

Utah 4.0%

Minnesota 4.0%

Mountain 3.9%

District of Columbia 3.7%

Virginia 3.7%

Arizona 3.5%

Vermont 3.4%

Idaho 3.4%

California 3.3%

Alaska 3.1%

Washington 2.9%

South Dakota 2.9%

Wyoming 2.9%

Montana 2.8%

North Dakota 2.7%

Oregon 2.6%

Hawaii 2.4%

Source: Mortgage Bankers Association

* The bad news cause the stock market to spiral downward with the DOW below 12000 for the first time in a long time this week.

* The good news in California, the delinquency rates is still relatively low compared to all 50 states. Hopefully consumer will get back into the market because of below market pricing.